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What’s Going To Happen To DBS Group Holdings Ltd Because Of 1MDB Investigations by MAS?

There are ongoing investigations on Malaysia’s government-linked investment fund 1MDB.

Bloomberg reported earlier today that the Justice Department in the US has filed lawsuits to seize more than US$1 billion in assets from 1MDB; it is money that the Justice Department thinks the investment fund has used to buy assets illegally.

In Singapore, the Monetary Authority of Singapore (MAS) has issued a statement today naming three banks that have links to the 1MDB scandal.

Of the three banks, DBS Group Holdings Ltd (SGX: D05), Singapore’s largest bank by assets, is the only Singapore-based bank. The bank has been found to have “instances of control failings” in monitoring suspicious transactions. MAS also stated that the lapses were serious and it is planning “firm regulatory actions” against the three banks.

This follows the May 2016 order by the MAS for Swiss bank BSI Bank to shut down its operations in Singapore.

BSI Bank was found to have committed serious breaches of MAS’s anti-money laundering requirements, in addition to having poor management oversight and the occurrence of “gross misconduct” by some of the bank’s staff, in handling 1MDB-related fund flows. MAS did point out that DBS did not have any “pervasive control weaknesses or staff misconduct… unlike in the case of BSI Bank.”

This is the first high-profile investigation into DBS regarding anti-money laundering issues. But, DBS has been in scandals before.

For instance, in 2010, the bank was sued by investors for fraudulent and negligent misrepresentation of Lehman Brothers-related structured investment products. The now-defunct Lehman Brothers was a US-based investment bank that was at the heart of the global financial crisis of 2008-09. DBS ended up paying US$84 million to its clients in Hong Kong.

Would there be lawsuits brought against DBS as a result of its involvement in the 1MDB case? Or would DBS be slapped with a major fine by MAS? It is unclear at the moment what regulatory actions MAS intends to enforce on DBS. But whatever it is, it is not going to be good news for Singapore’s largest bank.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn't own shares in any companies mentioned.